Schumer to shareholders: I’m from the government, and I’m here to help

Posted by Marc Hodak on May 16, 2009 under Collectivist instinct, Politics | Be the First to Comment

One of my dear senators Chuck Schumer, has introduced a “Shareholder Bill of Rights” in his august body.  After the reaming investors have gotten from recent government actions, it seems appropriate that the government offers them some relief.  So what does this bill promise?

– Say on pay

– Proxy access

– A risk committee

– Separation of CEO and Chairmanship

– Annual election of all directors

If this sounds like an activist wish list without any identifiable link to the current financial problems, you’re right.  I defy anyone to point to how any of these items, or all of them in tandem, would have prevented a single liars loan, or the artificial inflation of asset prices that drove so much behavior the wrong way, or would have stopped a single homeowner from taking on a mortgage they couldn’t afford.  By insuring directors are elected each year?  By providing access to the proxy statement to hedge funds and union chiefs?  Aren’t the people arguing that a risk committee could have contained risks the same ones who argued that compensation committees could contain compensation?

“It has become apparent that one of the central causes of the financial and economic crises we face today is the widespread failure of corporate governance,” Schumer, a key member of the Senate Banking Committee, said in a letter to fellow lawmakers.

Like any good lawyer, Schumer selects his facts carefully.  If any knowledgeable observer was to rank the central causes of the financial and economic crisis we face today, corporate governance would not possibly make the top ten.  It would fall well behind such government induced causes as Fed loose money, federal guarantee of Fannie and Freddie bonds, CRA quotas, failure of regulators to identify fraud at SEC registered funds like Madoff’s…

Corporate governance has been far from perfect.  But our current downturn may not have been preventable by any combination of public and private behaviors.  Market downturns happen naturally; they create sparks and fires in various parts of economy. This downturn could, however, have been a far less damaging if the government had not thrown gasoline all over our economic structure.